Singapore's economy expanded at a faster pace than initially estimated last quarter as rising global demand boosted manufacturing and the opening of the island's first casino spurred tourism.

Gross domestic product grew an annualised 38.6 per cent from the previous three months in the first quarter, compared with an April estimate of 32.1 per cent, the trade ministry said in a statement today. That was more than the 33.4 per cent increase economists were expecting.

From a year ago, the economy expanded by 15.5 per cent, the highest quarterly growth on record. Singapore's economy shrank by 1.3 per cent last year, revised data shows after a previously reported contraction of 2 per cent.

Officials said the strong rebound from its worst-ever recession last year will be helped by a broad-based recovery in the United States and buoyant growth in large Asian economies such as China.

"The data from Singapore and around the region underscore that so far, the rebound in exports and production has been much better than what people have been expecting," said David Cohen of Action Economics.

Mr Cohen predicts the economy could grow up to 10 per cent this year, above the government's forecast of 7-9 per cent and notwithstanding the risks from the debt troubles in Europe.

Bubble risks

However, the government warned of risks from asset price bubbles in Asia and the fallout from Europe's debt crisis.

If asset prices correct too sharply in China, it could have "negative spillover'' effects on regional economies, Ravi Menon, permanent secretary at the trade ministry, told reporters in Singapore today.

"Should investor sentiments wane or if more monetary tightening measures are introduced, sharp asset price corrections could follow,'' the ministry said. "If these risks materialise, they could affect the global recovery and negatively impact Singapore.''

Singapore's non-oil domestic exports will probably gain between 15 per cent and 17 per cent in 2010, from a previous projection of as much as 12 per cent, the trade promotion agency said today.

Singapore's government expects the economy to grow as much as 9 per cent this year.

The Monetary Authority of Singapore, which uses the currency instead of interest rates to conduct monetary policy, said April 14 it will "re-centre the exchange rate policy band at the prevailing level'' of the Singapore dollar, shifting to a stronger range for the currency to trade in. The central bank guides the Singapore dollar against a basket of currencies within an undisclosed band.

The Singapore dollar, which rose as much as 1.2 per cent on the day the new currency stance was announced, has since weakened amid the European debt crisis. It traded at $US1.3977 against its US counterpart in early trade, falling 2.1 per cent this month.